On Earth Day of 2019, San Francisco became the first US city to introduce 100% renewable energy requirements for commercial buildings. These requirements offer a timeline for when different sized buildings have to comply. All commercial buildings over 500,000 square feet have until 2022, buildings over 250,000 square feet have until 2024, and buildings over 50,000 square feet have until 2030. This move to renewable energy is expected to reduce emissions from commercial buildings by 21%. A big number considering commercial buildings make up 44% of all greenhouse gas emissions in the city.
The ordinance comes with 3 important exceptions:
1) If there is a lack of renewable energy available to meet demand
2) If the cost for renewable energy is more than 5% of the providers default option
3) If the new requirement conflicts with new state or federal energy laws
Number one is important, because you can not issue fines to businesses for failing to comply if the energy supply is not available. Such a drastic increase in demand would be hard for any supplier to meet. To prepare the city for this change, the Bay area has been offering incentives for energy companies to develop renewable options. San Francisco first established a goal of 100% renewable power back in 2008. Since then, they have awarded numerous grants for renewable energy projects.
Number 2 is needed in order to stop energy companies from price gouging. By making the renewable energy a requirement, the city is forcing the demand line to become vertical at the number of all commercial buildings. The law would also make renewable energy an inelastic good. No matter the price, the businesses would still have to purchase in order to comply with the law. To combat this, the city put a price ceiling on renewable energy. We know that price ceilings often result in a shortage of supply, and the output of lower quality goods, so it will be interesting to see of the incentives offered by the government are enough to bridge the gap.
This type of large government action throws a big wrench into the workings of the free market. It will be interesting to watch how this plays out over the next ten years. San Francisco serves as a test run for other large cities, who can take this information and create plans of their own as we move to become a greener nation.
-Steven Brown
Sources
Go 100% Renewable Energy : San Francisco - 100% Renewable Power by 2030 (go100percent.org)
San Francisco Now Requires 100% Renewable Energy for Commercial Buildings (fbm.com)
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